Skip to main content
4:00 am
hello. you're watching cnbc's "worldwide exchange" from davos. i'm ross westgate. and i'm kelly evans. these are your on headlines from around the world.
4:01 am
mostly green arrows across wall street today as we near the 1500 mark on the s&p 500. and a 0.1% contraction is expected for the german economy in the fourth quarter. those figures will be out in just under 30 minutes. the governors of the banks of italy -- trade in siena. and imf's christine legarde tells us that central bank stimulus is still needed. >> we have the central bank on the one hand which have done quite a lot, which have been the fireman, in a way. and you have the policymakers on the other hand particularly in the eurozone who have made some progress and need to keep the momentum.
4:02 am
>> now, any minute now, we're expecting the results from germany's ifo institute. january business climate index survey is expected to rise to a reading of 103 from 102.4 in december. this, of course, follows an increase in expectations in the dew survey earlier this week. we've seen an increase in the pmi surveys for germany over the last couple of months. as the german economy particularly looking to climb out of its contraction in the fourth quarter, we're waiting on the ifo senior va to tell us whether sentiment broadly speaking is picking up in line with that development. now here we're getting the survey. it would thou be ifo expectations index, this on reuters. it's higher than expected, 100.5 versus 99. the overall index looks like it came in at 104.2 versus the consensus of 103. so stronger than expected.
4:03 am
it rose in january, current conditions 108 versus the expectations of 107. euro/dollar is about 1% higher on the back of that news. the ifo institute, current conditions, 108. headline index, 104.2 versus 103. ross, what do you make of it? >> well, you can see what's going on with the euro there, 134. let's get more from finland. good to see you, alex. thanks indeed for joining us. the defense here that we're no longer in crisis fighting mode, the question as we look at data in germany, the question is whether we've made a fundamental turn, a fundamental change and whether things are temporary. >> i certainly hope we've made a fundamental turn. if this crisis is 100 steps, i'd say we are about 60 steps down
4:04 am
the road. now, really, we have the fundamental institutional things in place. so that has calmed down the markets. what we now need is political stability. i think the italian election is one thing and the second thing we need in europe more than anything else is -- >> yeah. we thought stabilizing the crisis in terms of the bond spreads playing out was hard. getting growth into europe looks to be an almost impossible challenge. unemployment rate for spain, 26%. really weak pmi out of france, as well, yesterday. >> we need several things. one is structural austerity at home. through austerity, i believe you can get growth. secondly, we need to continue liberalizing the market. thirdly, we need more world trade. but we should be looking at a foreseeable furp, or slower growth in europe than russia, china or the united states.
4:05 am
>> let's talk about austerity. austerity when you're part of a single currency, if you're in the uk and you're looking at austerity, you can let your currency weaken, you can control central bank money. can't really do that in europe. and the imf has admitted the multiply they got totally wrong in countries with bailouts. >> yeah. i think that's the tough part of having a common currency in variable states. i'd love to see the euro be weaker because then it would drive our exports and we would get economic growth. but cutting expenditure and trying to stimulate the economy through reform. >> what's expenditure? in the uk, we have investment spending, which is cutting off your nose to spite your face. >> the problem is, of course, you have a monetary union, but you don't have a financial union yet. that means on the financial
4:06 am
side, on the fiscal side, on the economic side, you're going to have to do those reforms at home. no one else can help you. >> are we going to have full monetary union at some point? is that the future? is that where we're going or not? >> i think integration in one area leads to pressure to integrate in another one. but i do believe that the european union will always be much more than an international organization, but at the same time, less than a state. i do think that the next step in european integration is strengthening the euro, in other words, having more economic policy coordination, but we'll never have a fully below economic -- >> you say you support what david cameron was saying. so what would you say, though, if britain says, look, we joined what we thought was a common market. we don't want to be told -- have rulings handed down by the european court all the time and all the red tape for business. if they don't get a repeal for
4:07 am
that stuff, where would you stand? >> first of all, i think the whole idea that the european union is only a common market is a fallacy. it's simply wrong. the european union is a political union which uses economic instruments. what i like about cameron is the economic instruments which he suggests. it's less red tape, more single markets, more competitiveness. that's the side that we need to work on and i think that's going to be the idealogical battle in europe in the next couple of years. how much support is that do you think? >> there's a lot of support for those guys who have good economies. the netherlands. i'd argue germany, as well, you saw the reaction of angela merkel on this issue. countries such as denmark, sweden, who all believe in a social security system. >> the mood in davos is getting so good that he thinks he might have time to go cross-country s skiing. >> he's a fellow friend of mine, i'll probably take him
4:08 am
cross-country skiing together. >> things are not that good, are they? >> things are not that fantastic, but i would still argue that things are a hell of a lot better than they were five months ago. >> alex, thank you so much. all right. we've been speaking to christine legarde this morning. let's recap. >> it's doing better than other european countries. that is it has been extremely firm in its message to european partners about structural measures, about a steady path of consolidation within the membership. but also, an equally strong message about, you know, we are all members and we will stay members and we will do what it takes. you know, clearly, the discussions that we've had, you know, troika partners with the european members was comforting
4:09 am
in that sense. as far as greece was concerned. there was a clear indication that the eurozone was there to stay, but the euro was a common good and that they were prepared to shoulder the effort of members under good discipline and rules as is typical of a german approach. but the economy of germany is, you know, clearly doing better. not brilliantly, but none of the eurozone members is doing brilliantly. >> just another great interview here from davos, kelly. >> ross, great stuff. i was fascinated to hear finland's finance minister talking about preferring to see the euro trade lower. but if anything, it's higher on the back of the stronger ifo sentiment survey that has germany's dax hitting its highest level since january 2008. it's up 0.9%.
4:10 am
7818 is the level there. we know even as u.s. indexes have been here multi year highs, the xetra dax adding almost 30% last year. you a better than expected data out of germany despite a steep contraction in the fourth quarter, that index continues to test multi year highs. not the case for monte depasci. the italian bank has been suspended from trade. they were indicated up. i believe it was 7.5%. they were down almost 22% in the last few trading sessions. the issues surrounding scandal at the bank are now threatening many, including mario draghi. he served as head of the bank at the time. italian prime minister mario monti has signaled he is willing to discuss the issue is parliament. ross. >> yeah. of course, we were speaking to the govern of the bank of italy
4:11 am
about this, as well, this morning. he was saying, look, we didn't drop the ball over derivative trade. this is -- he said we shouldn't have any concerns about the stability of this particular bank. >> the situation was known and under careful consideration for a long time. as a matter of fact, we have been pulling the liquidity conditions of the bank and in the eba analysis and the need for further capitalization, we clearly doubt that there was a need of further capitalization and the bank was not able to provide -- and then the issue of the loan. so this is the process that we are considering. >> all right. that's governor of the bank of italy. also, coming up on today's program, mario draghi is speaking here in davos in around
4:12 am
about 20 minutes. don't go anywhere. coming up from davos, in the meantime, though, i want to give you a check on market action on this friday as we basically wrap up, get close to wrapping up the month of january. the stoxx europe 600 is looking up about 0.2%. it's mostly advancers. about a three to two ratio against decliners this morning. european markets, we want to take a closer look at the bourses. we want to focus, of course, on the xetra dax. this up almost 1%, at its highest level since 2008. almost five-year highs for this index. the cac 40, the ibex are adding about 0.3% today. the ftse 100 is up about 0.1%. we'll find out short will i just how strong the uk economy was at the end of the year after third quarter help by the olympics, the concern is that economy instead contracted in the fourth quarter, maybe looking at something like a triple dip
4:13 am
recession. too soon to go that far, but that may account for some of its underperformance this morning. bond rates, let's take a look there. what's interesting is we're seeing this trade lifting the peripheral. the spain, ten years are rallying almost to 4% in this case. extraordinary, 4.08%. we're not far from going sub-4% for italy. it was, what, 12 months ago that we were above 7%? it's amazing just what a rally we've seen here in this debt. ten-year for spain, 5.16%. this is why you're starting to see this question as to whether the rally has gone too far. let's take a look at forex because a lot of major move in this space. the dollar/yen, up about 0.5%. 90. this is the level. of course, there's two things going on here. yen weakness, which has helped the nikkei. the aussie/dollar, firmer. sterling is rallying against the dollar. the euro is up 0.4%. 1.3430 is the level there after that stronger ifo data out of germany. now, mention the dollar/yen,
4:14 am
mention what's going on with the nikkei, but let get plenty more on what's been happening along with some warnings on the strength of gloeg global demand coming from the likes of samsung. will i sixuan has plenty more from singapore. >> thank you, kelly. let's start with japan. that market yet begin took center stage in asia. december cpi came in at minus 0.2% piling more pressure on the boj to beat deflation and eventually meet that 2% inflation target. the boj jumped nearly 3% and it's up for the 11th straight week. that's the longest winning streak in about 42 years. the japanese yen weakened to a fresh 2 1/2 year low against the green back. that's fueled a strong rally in exporter stocks. shares in china gave back strong gains earlier ending down by 0.5%. chinese stocks led losses of prot taking after north korea
4:15 am
warned us more rocket launches and a nuclear test. the weakness in the mainland dragged the hang seng lower by just a touch. china mobile shares slipped for the fifth straight sessions. elsewhere, south korea shares pulled back for the third straight session, down almost 1% today. suppliers, they continued to tumble. samsung electronics lost 2.5% despite record earnings. it also announced a cautious cap ex plan for the first time since the global financial crisis. meanwhile, kia motor fell almost 5% today, to a more than two-yee low after the rising won took a bite out of its profits. the asx/200 managed to extend its winning streak boosted by upbeat data and strong production reports. india's sensex is now still in action, trading higher by about 0.8%. on that note, let's get back to ross. >> okay. sixuan, thanks for that. good to see you. we'll catch you a little bit
4:16 am
later. more to come here on "worldwide exchange" from davos. we'll be joined with mike brown. we'll get right to him when we come back.
4:17 am
4:18 am
4:19 am
as we can see the focus for the economy in davos, we can see mining and commodity experts. they think they're pretty optimistic for what's to come this year. here is a recap. >> i'm actually a little bit more optimistic that 2013 will see us recovering and, therefore, we take the view that the oil prices for 2013 and that will actually not slow down the growth. as we can see, things coming back. i'm confident that the gold price will continue to go towards 1,800. considering that given any other uncertainties and certainties about, for example, the yen, the new bank of japan policy on inflation targeting, there are a number of very attractive
4:20 am
investment assets. >> despite the global economic downturn, 100, 110 has been pretty stable. most of the screens project around the $80 level, 8el 0 to 90, i would say. and governments in the region oil producing governments tend to budget at that sort of level. natural gas, of course, a much bigger variation and the u.s. has become competitive in petrochemical and other sectors because of the shale gas revolution. >> and of the that's on commodities. mike brown, impacted deeply by what happens with the mining industry in south africa. we've seen a lot of fallout from the platinum mine disruptions. you're exposed there. how are you measuring that? how is that going to affect you? >> certainly it has a large effect on the country as a whole. there is now dialogue taking
4:21 am
place between business, government and labor to try and resolve those issues. more directly in terms of our bank, clearly we have a large minerals business. but i'm very pleased to say that we've had no direct exposure today. >> are you going to have to increase provisions at all for bad debts? >> no, i don't believe that our provisions will increase as a direct result of this at all. >> okay. but what happens if it continues? this is going to drag the economy down, as well. it has that wider economic impact, as you say. >> yes. certainly if it does continue for a long period of time, it will continue into account growth. but i think we are more positive than that. i think the dialogue will produce a sensible camp and business and governments are now firmly behind the national development plan. so i'm a little bit more positive than that. >> it's good to hear.
4:22 am
the rand is down for four years against the dollar. how is it to cope with that? >> it doesn't affect our business directly. clearly there's a knock on effect on interest rates if the rand stays at these levels and the rand is likely to be higher for longer. if you look across the range of economicic indicators, the rand is weaker and some of the shorter term indices are doing. the long-term confidence index is up. equity markets are up quite strongly and the bond market has, in fact, xwrfd over the last couple of months. >> manufacturing was off, 15% of the economy. that was contracted in the last set of numbers i was looking at. that's a way for the mining sector, as well. it's still quite a bit of drag. >> absolutely. the mining sector feeds the economic sector. so our outlook would be for the economy in 2012 to have groan at around 275% and expect a similar number in 2013. >> what do you do in business to navigate what's going on at the moment?
4:23 am
>> so it's tricky. i think the key to running any business right now is agility. there isn't a lot of forward activity internationally or domestically. perhaps more confidence now in the first months of the year. but it's trying to make sure that your business is both resilient and agile to deal with whatever circumstances arise. >> we had a guest on earlier this week who says the next 30 would be would be affluent. is south africa, do you think, going to lose its share of the pie? >> i think the overall pie is going to grow and maybe we might lose in percentage terms because it is a more advanced economy and therefore is likely to grow at lower rates, but with africa, the opportunity is to participate as the gateway into the growth rates in the rest of africa. >> and what about you expanding further into the rest of the continent? we have obviously a strong business in south africa. we have businesses in namibia,
4:24 am
mumbai and zimbabwe. he think it has enormous potential. as more and more south african clients do best in the rest of africa, clearly we refer them to echo bank and we've been able to provide them with some support for their growth ambitions and have the option to acquire 20%. >> are you getting a sense from international times, as well, for those looking to invest in africa that the one thing -- the three parts of the thing -- there's always been resource. the one thing is governance. do you get a sense how people think that is changing for the better? >> yeah, definitely. on average, it's changing for the better across the south african continent and people are much more positive around that. clearly, resources has always been there. but what you're starting to see emerge are the african
4:25 am
infrastructure story and the emerging middle class story. >> yeah. you see, the middle class is interesting. the bank, middle class is what you need to exploit. how big a part does mobile banking play, is going to play in that? >> in enormously large parts. we've launched the platform in south africa and we have about a million customers on part with our partner vodafone. we spent a lot of time and money building what we call a digital highway that enables us to roll out mobile banking apps on a speedy basis. so i think mobile is going to pay an enormous part in access to financial services where there isn't existing infrastructure. >> do you think you're sort of in a way, you know, africa is going to be teaching the rest of the world how to do mobile banking? what are the lessons that might apply to the rest of the world, more developed world? >> i think that's exactly right. africa finds itself at the confluence of mobile penetration greater than banking penetration
4:26 am
in many, many markets. it gives us the opportunity to leapfrog some of the brick and mortar operations. kenya led the way and i believe you'll continue to see lots of innovation coming out of africa in that space, again, because in many ways, our banging systems are in really good shape. they're not looking to downsize or shrink very strong capital levels. others are 11% and basel three trying to innovate for the benefit of our customer pes. mike, good to see you. thanks very much indeed for join onning us. kelly, back to you. >> thanks for that, ross. japan is still in deflation mode as data out today showed the country's core cpi drop for a second month in a row. it was down 0.2% in december from a year earlier. it's a long way off the 2% inflation target that was just set by the bank of japan and the japanese government. core cpi down 0.6% from a year earlier. investors continue to focus on
4:27 am
japan's loose monetary policy and they pushed the yen to a 2 1/2 year low against the dollar. the finance minister shrugged off criticism that the aggressive action could trigger currency wars. >> we know that. we know the state of -- push into risk. i think it's time to get together. really, in a global economy. so you yourself can move something along. you have to cooperate with economies. >> the sound was a little low on
4:28 am
that one. we were trying to make you turn it up and be engaged here at "worldwide exchange." in any case, stay tuned. among the reasons the be engaged, we are minutes away from the release of fourth quarter gdp in britain. there's lots of speculation that could be showing a decline. perhaps we'll hear from george osborne, too, reacting to that release. it's in just a couple of minutes. >> and here in davos, mario draghi will be speaking, as well. we'll be taking you to that. stay tuned. what are you doing? nothing. are you stealing our daughter's school supplies and taking them to work? no, i was just looking for my stapler and my... this thing. i save money by using fedex ground and buy my own supplies. that's a great idea. i'm going to go... we got clients in today.
4:29 am
[ male announcer ] save on ground shipping at fedex office.
4:30 am
4:31 am
this is "worldwide exchange." i'm ross westgate in davos. >> and i'm kelly evans. we are waiting for the uk fourth quarter gdp figures. we can tell you that here we're getting the numbers through. and if i can just pull up the data now. a much deeper than expected decline. uk preliminary fourth quarter gdp shows a contraction of 0.3% on the quarter. this is not annualized. the annualized rate would put that at something better than 1%. 0.3% on the quarter. it was exactly national from a year earlier. that's larger than what was expected which was a drop of 1%
4:32 am
which is a bigger economy by 3 cents from a year earlier. industrial production, construction was small, services were flat. mining and quarrying posted a drop of minus 10%. that was its biggest fall on record. so there may be a one off factor played here. government services, fell 0.1%. interegly, that rlects gi back from third quarter olympic cket sales. so if you were to take out potentially that decline of 0.7% and the 10% drop in mining and quarrying, that figure probably would have looked better. nevertheless, sterling has fallen on the news. it's down almost 0.2 against the dollar. it was trading nearly those levels beforehand. the ftse giving up some of its gains, going from 0.1% to nearly flat on the day. european markets, show smu of the divergence that we're seeing at multi year highs.
4:33 am
the ftse, though, 6266, so kind of sitting there without necessarily too much reaction. but, ross, you know, how do you feel about these figures, about the health of your home state? >> clearly disappointing. you mentioned some of the factors behind that. i think most expect it to be a negative quarter here. it will put more pressure on george osborne. the chance lore has been speaking to maria in an exclusive interview. here is a recap. >> the uk economy, our next forecast is for the uk economy to grow this year and next and indooe deed, it's a celebration and we are forecast to grow more than germany or france. now, we have a tough situation with our neighborhood where we have the eurozone in recession
4:34 am
and that is a major trading partner of the uk. 40% of our part yanlts goes to the eurozone. but we still have a real economic situation in many of these eurozone countries. the rebaming is happening. the jobs are being created. and also, another encouraging sign is that the rate of the new conflict creation in the uk is at its highest rate on record. so you're seeing, hopefully, the great successfuls of the future being born out of the difficult times of the president. >> that's george osborne, the chancellor speaking exclusively to maria bartiromo. that was recorded before the release of that gdp number. it was recorded last night. i think the expectation is what it was going to be on the consensus number. as well, we're currently waiting taking that, as well.
4:35 am
that's the form where it's going to happen. as you can see, a row of empty chairs at the moment, which is very good news because that means we have more time to speak to our next guest, the central bank minister of turkey. thank you for joining us. turkey has been navigating things in an interesting way. you've been using a lot of tools to control the economy, to try and control the change rate and inflation. why did you decide in 2010 to go down that particular route? >> mainly because we had the problem of europe, i should say. we have relatively high and resellant growth. our last quarter figures, quarter on quarter, probably close to maybe even higher than 1%. and then we expected the fourth quarter for 2013. so we have to be very careful about criticals.
4:36 am
it's a difficult problem. what we have done is pressed to tighten using macro prudential tools as you have pointed out while keeping the short-term interest rates as low as possible. >> loan growth is still quite high. if it approaches 15%, is that a threshold where you will act again? >> actually, we are coming down from 25% two years ago. the macro prudential tightening has to bring it down to between 15 and 20 and our reference rate, i should say, for the end of this year is 15%. so we could do a little bit more tightening on reserve requirement, but not much is needed i think on that. >> what about the lyra appreciate appreciation and where you want to try and keep the exchange rate? >> on the currency, we're focus on -- and we don't want extreme variations from fundamental values and that could happen
4:37 am
because of short-term capital flows. so what we have done is a structural aspect. we have a device many mechanisms some based on reserve requirements and some based on factors through the instrument to make them stabilizers. >> controlling currency is very difficult in this climate. we have to see their currency weaken. it's a concern about currency wars. are you expecting greater currency volatility, maintained heights of current volatility? >> basically, i mean -- >> no. so that's what's happening.
4:38 am
>> but globally, it will be a headache. it will be a problem. so the best thing is, if you have a nominal control variable, then you can only service the nominal variable which is deflation. so you better not try to do that. but in terms of the exchange rate, too much variation. when the oil prices go up, our currency should differ and appreciate. that is kind of also something that we -- >> i was going to argue, still large external deficits for currency which is still a problem. you get currency outflows, that causes a problem. how can you reduce the risk from that? >> so the key there is to start to control the extremely rapid growth of credit and domestic demand and in the meantime keep exports growing. the exports are still growing
4:39 am
mode modestly, 10% year on year. diversification from europe to oil exporters, to south africa, russia, to united states. so that is happening in the exports. you have to be very careful. >> thank you very much. from one central bank governor to another, mr. draghi is now speaking in the tore yumm here in davos. >> the relaunch of the euro. that's the angle from which one has to look at everything that's happened. and, for example, if you look at the extraordinary progress that national garments have made in pursuing fiscal consolidation and starting in structural reforms. the benefits of these actions start being visible now. his spread all over, increased
4:40 am
competitiveness, current accounts are turning into surpluses. fiscal positions are generally better. so all in all, if you look back, one way you're understanding how much has been achieved this year is just look back and look back at the same things a year ago. how debt, deficits, competitiveness, experts, current accounts, where a year ago? so all in all, i think that's the first thing that happened. and governments ought to be given credit for what they did. but there's a second factor that for the first time in many years is a process of i would say of restarting, re-engineering european reintegration got momentum. there are certain interest and similarities that lead us back to the late '80s, early '90s when the euro was conceived.
4:41 am
many commitments that have been undertaken by the european leaders in 2012 had a date like you remember the law passed to the euro with date, there was a calendar and so on. there was a practice that had been been abandon and it's been resurrected by the leaders at the june summit. that summit has an importance which will continue to remain with us for a long time. so there has been substantial progress at the euro area governance level. and the third thing, of course, is the action and the actions undertaken by the ecb. we not only cut rates three times, we changed the collateral rules. we also launched in the early part of the year -- actually, it was the end of 2011, we launch today two very large ltros.
4:42 am
it was 1 trillion gross injection of liquidity met was about a half a trillion. at that time, avoided a measure -- a major funding problem which could have had unexpected and dramatic consequences on the financial system. there was a funding -- people say use the word bunch. in the early part of the year, there were something like more than 230 million euro bank bonds coming through and 300 billion of sovereign issuance. so the banks that basically stopped lending started in june the year before, june 2011. and we were watching the monetary indicators worsening and that was the context in which the ltro actions were taken. and then in july, in the
4:43 am
background of the central feeling expectations and fears about the euro, about the resilience of the euro, at the end of july, we announced the omt program which turned out to be very helpful in removing the tail race, removing the risk for the euro as such. are we satisfied with that? i think to say the least, the jury is still out. because all in all, we haven't seen an equal momentum on the real side of the economy. that is where we will have to do -- will have to do much more. >> you also took some monetary policy decisions, interest rate decisions, as well. >> yeah. we cut interest rates three times. 0.25 basis points each time.
4:44 am
so we basically changed our monetary policy stance at the end of 2011. >> so all in all, a year of very significant decisions in europe and by the ecb in adopting new instruments as well as utilizing traditional instruments. looking forward in 2013, have we -- thanks to all this action, have we reached a turning point in the outlook for the european financial markets and for the european economy? are we past the strains and the difficulties? and why don't you share your vision. >> thanks. thank you. well, let me try to sort of define a extra teamingic objective for this year.
4:45 am
i think for euro area, the most important strategic objective today is to overcome the fragmentation that still remains, notwithstanding significant improvements. of course, we have to comply with our basic primary mandate in maintaining price stability. but at the same time, to reach this objective, we have to have a -- we have to go back to a fully incident grated financial and capital market. i think that's the this year start in a context, with a background considerably different from last year. financial markets are experiencing a new restored sense of i would say relative
4:46 am
tranquillity. liquidity, corporate issuance, bond issuance, even sovereign spreads, all the volatility, all the indices point out to a substantial improvement of financing conditions, stock markets, for example, they increase substantially. so all in all, the background is considerably more favorable than weight was last year. what about the recovery? i think we -- we are moving the perception we have at the ecb is that the level of economic activity is in the process of stabilizing at very low levels. and we foresee a recovery in the second part of the year.
4:47 am
so it is a situation where you have what i called once a positive contagion on the financial markets and for the financial substantials, but we don't see this being transmitted into the real economy yet. the background for inflation shows a solidly anchored inflation specations. what's going to happen this year will be on the front of the euro area governance, it will be a year of implementation. many decisions being taken last year so this year is the time of putting them into -- in practice, translating them into actual actions. what are the messages? we can have a positive development if national governments will persevere in
4:48 am
their actions, both in fiscal the front oructal of evidence that we can do so within the existing framework. indeed. >> now, final question on broader financial stability issues. the creation of a single supervisor is, k, a very important step. there has been discussion, actually, of a eurozone resolution mechanism of a deposit insurance program. how do you see the outlook for these kinds of additional reforms? >> when i said in 2013 is mostly implementation. in fact, i should also say that the commission, european commission will present a proposal for the creation of a single resolution mechanism and of a european resolution authority in the course of this year. so it is going to be something
4:49 am
new on that front, as well. and it's quite clear that the -- it's quite clear that the crisis have taught us something, that you want to break the link between the banking systems and their sovereigns. and the way to do this is to have one single supervisor which is independent from the vested interest or the political interest of the national, the single national authority is the single political authorities. and have a common resolution mechanism. the ultimate target will also be to have a european deposit insurance guarantee. but that is -- is further out in time and i think there are good reasons for that. first of all, we already have national deposit guarantee insurance assistance which is working very well in different countries. so before we dismount them and create something else, we have
4:50 am
to think about. second, this is -- this is part of a very ambitious but long-term objective which is the mutualzation of risks. and so we have to have many other things in place before we can actually have the political support because this is not monetary policy. it's actually political decisions. for having a system of mutual -- that could mutualize risks in the euro area. >> indeed. now, this process of finalizing proposals, implementing it that we foresee in the coming year, are they going to enhance the reality and views about financial stability or enhance financial stability in the eurozone? >> yes, indeed.
4:51 am
yes, indeed. they are in a sense part and parcel of the process that we envision as one of the overcoming fragment, the existing fragmentation, breaking, as i said before, the link between banks and sovereigns. returning to a -- an integrated capital banking market. with much less risk than it had before the crisis. >> so this will be a year to watch closely the implementation. unfortunately, our time is going to be short, so i want to -- >> all right. so we've been listening to mario draghi being in a chat with john liske, former managing of the imf. let's recap, central banks, unlimited bond buying program, the omt will stay in place until markets push aside. but let's point out, it has yet to be fully realized. you talk about banking supervision, the largest banks will be supervised from
4:52 am
frankfurt. the single supervisor is a combination of national supervisors working together. the ecb is going to work intensely with that and they're working towards introducing that banking supervision. we might get a bit more of that, as well, with our next guest. christian meiser is had he head of cooperate banking of bank of america. we'll be joined by the finance minister from mexico and oli reign will be joining us. plenty more to come on our coverage of the world economic forum in davos. what are you doing? nothing. are you stealing our daughter's school supplies and taking them to work? no, i was just looking for my stapler and my... this thing. i save money by using fedex ground and buy my own supplies. that's a great idea. i'm going to go...
4:53 am
we got clients in today. [ male announcer ] save on ground shipping at fedex office. where will it send me... one call to hoveround and you'll be singing too! pick up the phone and call hoveround, the premier power chair. hoveround makes it easier than any other power chair. hoveround is more maneuverable to get you through the tightest doors and hallways. moreeliable. hoveround employees build your chair, deliver your chair, and will service your chair for as long as you own your chair. most importantly, 9 out of 10 people got their hoveround for little or no cost. call now for your free dvd and information kit. you don't really have to give up living, because you don't have your legs. hoveround replaced the legs. and now every hoveround comes with this handy tote bag and cup holder for access to your favorite items. and right now, get this limited edition hoveround america travel mug free with your hoveround delivery. [singing] hoveround takes me where i wanna go. call or log on to to find out
4:54 am
where a hoveround can take you!
4:55 am
into hello. you're watching cnbc's "worldwide exchange." from here in davos, i'm ross westgate. >> and here in london, i'm kelly evans. these are your headlines from around the world. mostly clean arrows today as germany looks at multi year highs and wall street eyes the 1500 level on the s&p 500. britain on the brink of recession, though. gdp falling more than expected in the fourth quarter, sending pound/sterling to a fresh one-year low against the dollar. mario draghi -- mario draghi says the central bank's limited bond buying scheme will stay in place until markets subside, but
4:56 am
point out the effect of emt is yet to be fully realized. >> are we satisfied for that? >> i think to say the least, the jury is still out. because all in all, we haven't seen an equal momentum on the real side of the economy. >> and the imf manage director christine legarde says central bank stimulus is still needed. >> we have the central banks on the one hand. >> right. >> which have done quite a lot, which have been the fireman in a way. and you have the policymakers on the other hand, particularly in the eurozone who cancer v made some significant progress and need to keep the momentum. >> if there's been momentum anywhere lately, it has been in the u.s. equity market. if you take a look at the s&p 500, we did see a six or
4:57 am
seven-day win streak. basically, the longest stretch of gains since 2006, pushing the s&p 500 within just points of the 1500 level on the close. today we're looking to add about another five points at the open. so the mood continues to be bolstered by the news flow out of europe and out of asia overnight. a lot of concern in the market. more analysts wondering if this move has gone too far too fast. but the nasdaq -- i'm sorry, this s&p move was despite the fact that apple was weighing significantly on that index. same was true for the nasdaq, and yet today we're signing it down ten points after absorbing apple's 12% decline in the market yesterday. interestingly, it was mostly an apple story. the rest of supply chain not as potentially as you might expect. the dow jones industrial average today looking to add about 50 points at the open, 13812 is the level on that one. now, if you flip over, give you a sense of what has been happening overnight, the cnbc
4:58 am
ftse global 300 up about 0.1%. a little better than that. the story is the germany versus britain. we see stronger than expected ifo data ow of germany echoing what we've hearing sending the dax up almost 1%, 7824, at its highest left since 2008. over here, the ftse trying to absorb the fact that gdp in the uk did shrink by 0.3%. that was worse than expected, although there were a couple of one off factors in there. the ftse initially came up to being about 0.1% and now it is rebounding a little bit this morning. spain, france hanging in there, too, this ahead of news due out in just about an hour's time as to the ltro repayment going to the european central bank. we'll have plenty more coverage on that later. first, let's take a look at how the bond wall is trading ahead of that event. the periphery, not showing too much concern. yields falling 5.17 and just about 4.11% respectively. again, extraordinary here
4:59 am
because depending on what happens later today, we might not be far off from this falling back below the 4% level here. gilt, prices falling. yield up to 2.03% after that disappointing gdp news. forex, sterling has been weaker opinion it's down about 0.1% against the dollar. it's down against the euro, so those vacations are getting priceyer for britain as we speak. the australian dollar a little firmer. the dollar/yen, this has been a big story. now over 90, up about 0.6% as the yen weakens today. the euro/dollar is up about 0.5% after that german gdp data and ahead of some expectation of asset tightening by the european central bank as banks look to repay some of those emergency loan payments from last year. now for more on what's been happening with asia, let's get to will i sixuan. she joins us now from singapore. hi. >> thank you, kelly. asian markets wrapped up the week on a mixed note. but japan yet again stole the show here in asia as december cpi came in at 0.2%, piling more
5:00 am
pressure on the boj to beat deflation and eventually meet that 2% deflation target. the nikkei jumped nearly 3% today and it's up for the 11th straight week, its longest rally in about throw years. shares in china gave back a strong gains earlier to finish down by about 0.5%. chinese defense stocks led to losses on profit taking. this after north korea warned of more rocket launches and a nuclear test. weakness in the mainland dragged the hang seng lower by just a touch. china mobile shares slipped for the fifth straight day after jason morgan's downgrade. apple suppliers continue to tumble. samsung electronics lost 2.5% today despite record earnings. it also announced cap ex plans
5:01 am
for the first time since the global financial products. meantime, kia motors fell to a two-year low after the rising won took a bite out of its of the. but the asx 200 managed to extend its winning streak, ending higher by 0.5%. this after strong production reports from miners. and the sensex ended higher by about 1%. back to you. >> sixuan, thank you very much for that. 2.5% decline there for samsung. interesting, not necessarily the best sign for global demand. i want first to bring you some new speaking of global demand or at least demand here in britain. after falling 0.3% which is larger than expected, britain's finance minister george osborne has responded. he said it shows we face economic problems and we will not run away from them. ross. >> yeah. they don't have much choice. they have to face up and deal with that. there's plenty of people that
5:02 am
would like more supply side. but anyway, that will continue. we've also, kelly, as we've been listen to go mario draghi, he said clearly financial markets have seen the benefit to the ecb actions in terms of the launch of the omt which hasn't been used. the key question is when does that transmit to the real economy? these were his thoughts on that. >> we will see that our accommodative monetary policy stance will find its way through the economy. and that's why we'll see a recovery in the second part of this year. >> okay. so mario draghi talking about a recovery in the second half of the year. and, boy, doesn't the continent need it, kelly. >> yeah. although i will say they're getting a bit of a benefit from andy murray's performance at the australian open. he's doing quite well against roger federer, i understand. >> i don't know. >> i'll try to share the play by play with you along with the
5:03 am
play by play for the british economy. ross, since we're wrapping up davos, you've been there for ser several days now, what is the focus? is it the u.s. recovery story? is it independence, we're seeing a lot of comments from george soro soros. finally being optimism about u.s. growth prospects as the market starts to push bond yields higher. >> and that's -- you know, that's a great point, okay. and is there a risk at some point? but if they're going up for the right reason, then, you know, that's not a bad thing. it also means that that window potentially, if a private equity guys borrow it, it might be a fairly short one. so people are talking about that, kelly. let's bring in christian miser on that particular point, head
5:04 am
of corporate global investments. kelly is raising this point about if confidence is returning, we will see yields particularly in the u.s. growth maintains starting to head higher. do you think that's going to happen? >> well, it can evidently happen at some point. but it must say, i think that's on the way out. >> some people say they think 1994 is coming. >> at some point. but i doubt that 1994 will be 2013. i think growth is still at moderate levels and europe is still looking at a zero percent growth this year. so i don't think that stimulus or that yield is anywhere around the corner. >> how much is europe still being a drog for your business? >> you know, it certainly doesn't help that the environment here has been very difficult. there's a huge swing in sentiment over the last three or four months. the sentiment is ahead of reality at this point. but in terms of the pick up of our business, it's been meaningful and the first three or four weeks of this year have started very, very strong.
5:05 am
>> mario draghi was there talking about banking supervision, largest banks will be supervised from frankfurt in the ecb. how does that all impact your european union? >> well, the direct impact, of course, is limited in as much as our principal regulators and supervisors are in the u.s. of course, we do operate in all of these markets and, therefore, our local units do have supplies by local rules. that goes without saying. i think the key issue is that regulatory certainty and stability and a revival testament in europe benefits the sector, benefits the markets and certainly, therefore, will benefit us indirectly. but i would say the direct impact on what we do day-to-day is somewhat limited, of course. >> we heard yesterday from barclay's from all banks, the environment is different. you have to cut your costs to fit now. look, when revenues were growing large, the banks didn't have to were about costs. now we don't have to be focused on costs. how much more do you need to focus on your costs?
5:06 am
>> well, cost is an issue for all of us and bofa is no exception to that. we've probably announced a number of measures to improve our efficiency, to improve our cost basis. i think the simple rule that revenues and is costs are broadly in line with where they were precrisis at this point in the industry. returns are lower. in order to improve returns, we either have to find revenues or cut costs. revenue necessary this market are harder to find and by definition, therefore, costs are a big issue. we have more to do, but very much in line with the markets? >> what about combination? he's got this idea that we should actually -- compensation should be paid out in relation to the length of the term of the contract, you know, if it's a ten-year loan or ten-year deal, that's when you get paid out on it. and i know that's not very profitability in investment banking, but is there a chance that may catch on? >> it's a complication that's been huge. the conversation has been
5:07 am
falling steadily over the last number of years. the length of time that our employees are tied into the defrls and the equity portion of our compensation has been going up. so i would say we've very much adjusted what we do and, of course, what the regulators have wanted of us and frank lit what the share hold erts and markets have wanted us to do. there's probably some ways to go, but the adjustment many has been very, very challenging. >> on deal flow, is that going to pick up? >> absolutely. the pipeline is looking good. in particular in the plastic businesses it's very, very trong and we get a continuation in the final quarter of last year. the big concern in my mind is m&a. in europe, the big deals are still largely in the conceptual phase as opposed to an execution mode. >> christian, good to talk to you. thanks very much indeed for joining us. right. plenty more to come on cnbc. we'll be joined by the finance minister from mexico. he'll be speaking to maria.
5:08 am
"worldwide exchange" continues after this break. >> with hotwire's low prices, i can afford to visit chicago for my first big race and l.a. for my best friend's wedding. because when hotels have unsold rooms, they use hotwire to fill them. so i got my hotels for half-price! >> men: ♪ h-o-t-w-i-r-e ♪ ♪ [ male announcer ] how do you make 70,000 trades a second... ♪ reach one customer at a time? ♪ or help doctors turn billions of bytes of shared information...
5:09 am
♪ into a fifth anniversary of remission? ♪ whatever your business challenge, dell has the technology and services to help you solve it.
5:10 am
welcome back to this truly global edition of "worldwide exchange." these are your headlines. wall street eyes another bull run at that psychologically
5:11 am
important 1500 mark on the s&p 500. britain on the brink of another recession. gdp falls more than expected in the fourth quarter. and speaking in davos, mario draghi says the effects of ecb's bond buying scheme have yet to be fully realized. now, a recent easing in mexico's inflation rate has fueled speculation the bank may cut interest rates, this after latin america's second largest economy forecast a slight slowdown in growth in 2013 citing risks from debt crisis in the u.s. and europe. let's head back out to davos where maria bartiromo joins us now. she has a very special guest to help us shed light on what's happening in mexico's economy. >> hi, kelly. thank you so much. i am indeed talking to the minister of finance of mexico. good to see you, sir. >> hi, maria. >> thank you so much for joining
5:12 am
us. we're hearing so much about so much money moving into mexico right now. first, before we talk about interest rate policy and what what's happening, give us a sense of what's going on in mexico and why you're attracting so much capital from investors everywhere. >> there's an interest in mexico because of basically two things. first, stability. it took a while for mexico to become a stable economy, but now we are. we have low inflation. we have a balanced budget, which is something that is -- it's quite unusual these days around the world. we have strong banking system with high levels of capitalization. and we have a flexible exchange rate. we have high reserves and on top of those reserves, we have a line with the imf that provides protection in case of abrupt disruptions in the financial system worldwide. so i think mexico is perceived as a country that has done its work towards stability. and the other thing that's attractive about mexico is the
5:13 am
prospect of growth. i think the prospects are good, and particularly with the aggressive reform agenda. >> you know, it's extraordinary, minister, because the fact is that you have managed to balance the budget for the first time since '09 and you have budget deaf sessions around the world and in many of the developed nations. what is next? what do you see as the next important goal towards economic growth for the country? >> i think it's stability. we've learned the hard way in mexico the cost of stability, of not having stability, but not we need to do the next step and the next step is productivity. >> and productivity in a broad sense. so reforms that the president is pushing and are scheduled to happen this year will have a broad impact in productivity in
5:14 am
the real economy. energy, telecom and the banking system. we have now a strong banking system but is not lending enough, particularly the small and medium sized companies. so this productivity reforms are the focus of economic policy these days. of course, it's a challenging environment. but i think it's something that is quite possible to happen. >> i was looking at some numbers and nearly 1% gdp growth this year is the target for growth in mexico. that's four times the pace of brazil. double the united states. because of that, you're seeing this huge inflow in money and business activity. are those targets accurate? >> yeah. i think this year we should be in the range between 3 1/2 and 4% growth. and it is a good growth rate if you compare it with other
5:15 am
countries in the world with some latin countries in the continent. but it's not enough. mexico is still an emerging country. we have a substantial amount of people still in poverty. and we need the to grow faster and at a steady te that's why productivity is so important. and we have fantastic samples of competitive in mexico. we need to make productivity something that is variable to the overall pop laying to the majority of mexico. and that's why it's important to do this crosswide reforms that can have a broad impact on the economy. >> what are the downside risks? many people worry about the drug trade. many people worry about security. >> what are you doing in this regard? >> well, security has been a problem in some very acute problem in some regions of the
5:16 am
country. it's fair to say it's in the a whole country. some regions are quite safe. but it's clearly left a mark on the perception about mexico in the world and it's something -- the president is absolutely committed to continue fighting organized crime and to do it in a comprehensive way. it's not more guns or more police forces. we do more than that. the financial aspects of the fight against organized crime is very important. that's why we're pushing on money laundering as a strategic target of what we're doing. and moeflly by doing this, by fighting crime in a comprehensive way, they have economic growth and we can make a turn on what's been an impression of violence in mexico. >> and in terms of the stability in that regard, what is the timing on this? you're speaking to an investor audience. what would you want investors to
5:17 am
understand in terms of your vision and how this evolved? >> for the first time around, we have a broad political agreement in mexico pt on the second day of his administration, the president signed an agreement with the leadership of the opposition parties to set up a calendar for reforms. so we have a calendar of energy reform and is fiscal reform should happen this year. fiscal reform is set for the second half of this year. energy reform is something that you should be working on in the next months. so this is the beginning of the administration and we have good prospects for reforms happening. some others like competition, these are continuous efforts to foster competition in the economy. but what is important is we have a calendar. >> what about mon tar policy? what should we expect on interest rates? >> interest rates in mexico are rates are table. and the fact that inflation is getting lower, may provide room
5:18 am
for eventually the central bank cutting rates. this is not something for the minister of finance to decide. we have an autonomous central bank whose only goal is to keep inflation in check. the yields on mexico are at historical lows and we will continue to tap into the markets. markets both in our currency. we just had a couple of weeks ago ever on a mexican bond. we will continue to top the markets throughout the year. >> let me ask you about the united states and how the two can partner better. and, of course, an important partner for the united states is mexico in terms of trade .some of the other areas. what would you like to see in terms of integration reform? >> i think reform is something for mexico to consider.
5:19 am
as president obama was told few weeks ago, mexico is not helping the u.s. how to do it. comprehensive immigration reform will have to address the issues that need mexico's collaboration, to having a temporary worker's program that will allow appear orderly travel of workers. we need to be an agreement with mexico. we'll support immigration reform in the u.s. we understand it's a u.s. issue and with respect to the u.s. will decide and our position is to make things to be helpful. >> and the final question here, as we see money coming into the country and the activity picking up in mexico, it's certainly a hot spot in the orlando. what industry specifically are driving that growth? >> well, manufacturing is the main source of our competitiveness. as opposed the companies in latin america. we have a quite sophisticated
5:20 am
manufacturing base. it's our space, it's the auto industry in all its component and we're quite competitive and we will continue to be quite competitive. >> minister, it is good to have you on the program the. >> thank you very much, maria. >> thank you so much. we appreciate it. kelly, back to you. >> just staying with the theme of mexico being strong, volkswagen has just announced that it's expanding production of its best ceiling gulf to mexico in 2014. it's not just the investment community that's excited about growth prospects there. >> thanks for that, kelly. "worldwide exchange" continues. more to come here in davos, as well. we'll be joined by at the u economics affairs commissioner, olli rein. "worldwide exchange" comes right back after this.
5:21 am
5:22 am
5:23 am
it's a step closer to recession for the uk economy in the fourth quarter. britain has showed a ladies and gentlemen of the jury than expected contraction. a decline of 0.3% in the final three months of the year. .that was more than the 0.1% decline that was expected by economists. now, markets and the euro and sterling to some extent shaking it off. nevertheless, concerns remain,
5:24 am
ross, about whether the policies of got have embarked on are the right fit for britain. >> absolutely. and it will mean the headline writers will be talking about the prospect of a triple dip reception. negative growth for that and it will power the pressure as you rightly say, kelly, on the finances of the uk. something that will make george osborne the chancellor even more uncomfortable. maria caught up with him before these figures were announced. here is ae recap of that. >> we have a reminder today that britain faces a difficult economic situation, a reminder that last year was particularly difficult. but we face problems at home with the debt over many years and problems abroad with the eurozone. where we export many of our products deep in recession. we can run away from those problems or confront them. we go on craving jobs for the people at the center. >> that was george osborne
5:25 am
speaking last night before the announcement of those gdp figures. there was the consensus on that there was a negative number. it has come in more negative that we thought. we'll take a short break. we continue the conversation in davos here. the economic and monetary affairs commission is with us. don't go thir.
5:26 am
5:27 am
5:28 am
hello. if you're just joining us, welcome to today's edition of "worldwide exchange" from davos. i'm ross westgate. >> and here in london, i'm kelly evans. wall street eyes another run at the psychologically important 1500 mark on the s&p. britain, though, on the brink of recession. gdp falling more than expected in the fourth quarter, sending the pound/sterling to a fresh one-year low against the euro. >> ecb president mario draghi says the central bank's unlimited bond buying scheme will stay in place, but he points out the effective omt is yet to be fully realized. >> are we satisfied for that? >> i think to say the least, the jury is still out. because all in all, we haven't seen a -- an equal momentum on the real side of the economy.
5:29 am
>> and the imf managing director christine legarde tells cnbc the global central bank stimulus is still needed. >> we have the central bank on the one hand which have done quite a lot, which have been the fireman in a way. and you have the policymakers on the other hand particularly in the eurozone who have made a significant progress and need to keep the momentum. >> well, we've largely been on a win streak for the major indexes in the u.s., this despite appearing was the keep weighing on the nasdaq yesterday down 12% in trade. the dow jones industrial average today is poised to open about 50 points in the nasdaq. 1495 is the level here against 1500. if nothing else, it's been i believe maybe six, seven in a
5:30 am
row for the s&p. it's longest winning stretch. it's not just low in the u.s., it's low in europe, too. let's take a look at the european indexes. the ftse 100 is adding about a tenth of a percent today. it did initially fall back towards that break even mark after disappointing gdp figures. now continue to go move higher. the xetra dax, look at this, up better than 1%. this after germany's ifo. came out better than expected following a spate of the economy. again, 7832 at multi year, about five-year highs. the ibex adding 0.6%. not too concerned it would seem about the repayments of those ltr loans. plenty of coverage in a bit. in the meantime, let's get straight back out to ross and maria wrapping up our coverage of "worldwide exchange" in davos. >> thank you very much, for that. we just saw christine legarde in
5:31 am
the headlines. she was speaking to you. what did she have to say about other matters? she was saying that, really, there is a strength story and also a weak story within the eurozone. she talked about bit about germany being the leadership in terms of strength. no surprise there. but she also believed that there is work to be done even there, because we have some catalysts on the horizon, like the eye trillionan horizon, let the debt due in spain that could cause some hiccups. here is christine legarde in germany. >> it's doing better than other european countries that it is doing extremely firm in its message to european partners about structural measures, about a steady path of consolidation within the membership. but also an equally strong message about, you know, we are all members and we will stay members and we will do whatever it takes. clearly, the discussions that
5:32 am
we've had, you know, troika partners with the european members was comforting in that sense as far as greece was concerned. there was a clear indication that the eurozone was there to save. the euro was a common good and that they were prepared to shoulder the efforts of members. under good discipline and rules as is typical of a german approach. but the economy of germany is, you know, clearly doing better. not brilliantly, but none of the eurozone members is doing brilliantly. >> and joining us right now to talk more about the eurozone and the implication for the economy going forward is oli ren. he is, of course, the european economy chief. good to have you on the program. >> thank you. >> i guess we can talk about germany and the differences in the economy. we have to start with the news of the day. and that, of course, is in the uk. we have the gdp figures out today. david cameron is saying he's
5:33 am
going to do a referendum on whether or not to keep the uk in the eu. what would be the implications if the eu has left? >> i think we are still quite far from that happening. of course, this announcement of a referendum years from now is creating uncertainty and is not necessarily helpful in terms of stabilizing the economy, neither in the uk or in the european union. >> do you think changes need to be made in terms of policies to encourage the uk to stay? >> in fact, many of the elements or the policy agenda of david cameron are something which are very important and the commission is working for the confidence of european industry, a rather comprehensive free trade agenda as well as the competition of the single market. this beneath for restoration of the european industry and of
5:34 am
returning to sustainable growth and better employment. but there is no need to leave the european union for the policy -- >> this morning, as you well know, the foreign affairs and trade, as well, there's quite a lot of support around europe for david cameron's thought process of what he wants to achieve in the single market. the question is, we've been trying to deliver ever since the lisbon treaty a better efficient market growth and we keep failing. why is this next time going to be any different? >> in fact, we have made some progress, for instance, for the european pattern was finally approved, years of difficult discussion. one reason has been that the member states have not always implemented the completion of the single markets. for instance, the services director has not yet implemented in old member states.
5:35 am
that's something where we need a stronger european union than a weaker european union to ensure that the single market works equally in all parts of europe the. >> what can you tell us about the status of growth? when will we see a real return to growth in the eurozone? we have these catalysts, elections, debt coming due for spain. >> last year was the year of stabilization for the eurozone economy for the european union. this year, 2013 will have to be a year of sustained recovery and we need to work this year so that structurally, as soon as possible, can return to a stronger ground in terms of returning to growth and job creation. and i would expect that in the second half of this year, we see stronger growth figures and next
5:36 am
year, 2014, i will forecast around 1.5% growth for the european union. >> it is fairly anemic. better than where we've been, of course. we still haven't seen the full impact of the omt according to mario draghi. i'm not confident that the politicians are going to use the time that has been bought by the ecb effectively. you must share some of the those concerns. >> well, i share some of the concerns and that is why i work for in order to avoid any kind of complacency in the european union or in the eurozone. it's important that you now capitalize on this breathing space that mario draghi's ecb actions have provided and indeed, we have to move the focus from share stabilization towards reinforcing the confidence of european economy
5:37 am
and the industry. we have serious talent in regards to the european industry base in many countries. so we have lost market shares, france, belgium, the other country ves lost market shares. we have to focus on both the cost elements more short-term as well as more structural limits long-term like education and research. >> this is the issue that everyone is dealing with around the world. many nations, trying to figure out do you do austerity or do you invest in some of these very important areas such as education and is infrastructure? would you like to see more stimulus coming out of the ecb? >> i let the ecb decide on its monetary policy. i have read carefully the report and christine legarde's statements about the need to continue with accommodative
5:38 am
monetary policy. to my mind, it's important that our policy mixes correct overall and it means that we need to continue with smart and prudent fiscal consolidation because it's so high, about 90% in europe. it is also a drag on growth. and at the same time, we have to ensure that the composition of consolidation is growth friendly so that we did not hamper elements like education, innovation and research. it's very important for future, medium and long-term economic growth. >> are there sectors in europe that you think will drive the growth more so than other industries? >> we have had strong sectors even during the crisis. for instance, pharmaceuticals have stand. but i would rather not go into a
5:39 am
kind of policy of the 1970s. brought on the to the market and demand sectors succeed. but at the same time, it's important that you look at the clusters of industry or sectors of industry so that we can improve the conditions in terms of access to finance, in terms of facilitating entrepreneurship and especially with the very real issue in europe. this whole enterprise is how business committees grow and become major players in the global scene. that's a handicap in europe compared, for instance, to the united states. and as compare toes entrepreneurship needs to cut the red tape, who needs to provide better finance. there is no one silver bullet. >> mr. rehn, good to have you on the program.
5:40 am
thank you very much for joining us. >> thanks for that, mr. rehn. kelly, back to you. >> maria, ross, thank you guys very much. we're going to take a quick break. coming up, tim geithner, talk about t.g.i.f., he has one more morning commute today before he steps down as u.s. treasury secretary. we'll take a look back at his tenure over the past four years next. don't go anywhere. ♪
5:41 am
5:42 am
[ male announcer ] end your long week... with a weekend getaway. save up to forty percent on all weekend hotel stays. book by january thirty first at
5:43 am
welcome back to "worldwide exchange." these are your headlines. wall street eyes another run at that all important 1500 on the s&p. britain on the bripg of recession as gdp falls more than expecteded in the kwourth facilitier. speaking in davos, mario draghi says the effects of the ecb bond buying scheme has yet to be fully realized. and today is tim geithner's last day on the job as u.s. treasury secretary. from overseeing t.a.r.p. and navigating the financial crisis to facing off with congress against the debt ceiling and the fiscal cliff, here is a look at the past four years as geithner gets set to exit. >> nbc news is now reporting that timothy geithner will be the treasury secretary under president-elect barack obama.
5:44 am
>> tim geithner offers not just extensive experience shaping economic policy and managing financial markets. he also has an unparalleled understanding of our current economic crisis. >> the ayes are 60, nays are 34. >> i, timothy f. geithner, i pledge all of my ability to help outline that challenge. we are outlining a new fiscal stability plan. >> will you step down from your post sdmp. >> it is a great privilege for me to serve this president and i am very pleased to have a chance to address the range of concerns you said. i agree with almost nothing in what you said. >> we've got the t.a.r.p. it's suppose to expire. >> we are working to put the t.a.r.p. out of its misery and no one will be happier than i am. >> i am complete confidence in tim geithner. >> lots of great people with lots of experience who should have known better made betts on the future of the country that assumed house prices would never fall. >> the dodd-frank reforms will
5:45 am
restore the banking system of the united states to its core purpose. >> i think the leaders understand we have not a lot of time and we have to wrap up the outlines of the agreement by the end of this week. >> i think s&p has shown really terrible judgment and they've handled themselves very poorly and they've showed a stunning lack of knowledge about basic u.s. fiscal budget math. if congress or washington is incapable of acting, then policy will be damaging to growth. >> i don't think that's a fair description of your plan. >> well, actually, i do, but we can go back and forth on this. >> is the administration prepared to go over the fiscal cliff? >> oh, absolutely. >> amazing, he made it through that whole first term given everything that happened, but he did. tim geithner's last day on the job, as we mentioned. if at first you don't succeed, try again. the s&p 500 will attempt to top and hold the 1500 level against today. it hasn't done that since 2007. we'll preview the trading day when we come back. to grow, we have to boost our social media visibility. more "likes." more tweets.
5:46 am
so, beginning today, my son brock and his whole team will be our new senior social media strategists. any questions? since we make radiator valves wouldn't it be better if we just let fedex help us to expand to new markets? hmm gotta admit that's better than a few "likes." i don't have the door code. who's that? he won a contest online to be ceo for the day. how am i supposed to run a business here without an office?! [ male announcer ] fast, reliable deliveries worldwide. fedex. [ male announcer ] how do you turn an entrepreneur's dream... ♪ into a scooter that talks to the cloud? ♪ or turn 30-million artifacts... ♪ into a high-tech masterpiece? ♪ whatever your business challenge, dell has the technology and services to help you solve it. but thanks to hotwire,
5:47 am
this year we got to take an extra trip. because they get us ridiculously low prices on really nice hotels and car rentals. so we hit boston in the spring-- even caught a game. and with the money we saved, we took a trip to san francisco. you see, hotwire checks the competitions' rates every day so they can guarantee their low prices. so, where to next? how about there? ♪ h-o-t-w-i-r-e... ♪
5:48 am
so let's give you a quick look at what's on the agenda today in the u.s. december home sales are out at o'clock eastern. they're expected to rise. there will be a special report on that after the existing sales came in last week. we'll hear from procter & gamble, halliburton, honeywell and kimberly-clark. nasdaq rebounding, s&p 500 pointed higher, too. they have been on a several day multi day trading session win streak. jeff motor mer is director of investment strategy of bank of new york melon management. i think i got that all in. ross westgate, of course, our market specialist out in davos this morning. they're both joining me now. jeff, first to you. we've seen what a six, seven-day
5:49 am
win streak for the s&p 500. some mervusness building about these levels. what's your tape? >> 1500 is clearly a psychological level. these numbers are important, but in a lot of times an excuse to take some profits and look at where they are. i think some of that happened yesterday. i think they'll take another run at it today. a lot of times you have to try these levels a number of times before you can break through them. markets tend to break through these numbers when no one is looking. i think it's a fairly healthy move here. we'll take another run and see what happens. even yesterday without apple, the largest constituent in the s&p, yesterday was a fairly impressive day as i look at the market's resiliency. >> jeff, talking about the resiliency, is it justified by the earnings figures or the outlooks, rather, that we're
5:50 am
getting? >> i would think so. earnings were roughly $50 a share. give or take. and we've doubled earnings and we've basically doubled, a little bit more than doubled the s&p. so i really think you have a decent foundation here. when you look at pe levels, historically, they're in reasonable bounds. when you put interest rates on top of them, markets could be, arguably, down right cheap. so i think you're getting a decent foundation underneath this market. i think it is -- again, we'll have to see how earnings play out, but i think it's a decent foundation. >> jeff, 1994, are we about to see a massive routing in the bond market? >> we think, again, rates will eventually normalize, but our works show it's probably not in the near term, in the next 12 to 18 months. bef a trading range on the ten-year of between 1.5 and
5:51 am
2.75, somewhere in there. so i think, again, you eventually want rates to go up and normalize based upon economic strength. and i think that will bode well for the stock markets. we have overperforming bonds in 2013, but not a route in the bond market this year. i think you will clip your coupon in your high yield and em debt, those types of things, and may get a bit higher yields in treasuries. but nothing, again, with the slowing economy, you're getting news out of the uk. we have gdp this year coming in at 2.25, 2.5%. so it's really a muddle through economy. sdmra muddle through, that's what mortimer says. ross, it's been such a pleasure. stay warm out there. see you back here on monday. >> yeah. i won't be in on monday. i'll be in on tuesday. but that's it from "worldwide exchange" coverage in davos. "squawk box" is coming up next. >> our special coverage starts now.
5:52 am
5:53 am

Worldwide Exchange
CNBC January 25, 2013 4:00am-6:00am EST

News/Business. Ross Westgate, Kelly Evans. Ross Westgate and Kelly Evans consider the business stories that have global significance. New.

TOPIC FREQUENCY Mexico 27, Davos 22, Europe 19, Us 18, U.s. 16, Mario Draghi 14, S&p 14, Britain 12, Uk 9, Germany 9, Christine Legarde 7, United States 7, George Osborne 6, Spain 6, Africa 5, Kelly 5, China 5, Ross Westgate 5, South Africa 5, Imf 5
Network CNBC
Duration 02:00:00
Scanned in San Francisco, CA, USA
Source Comcast Cable
Tuner Virtual Ch. 58 (CNBC)
Video Codec mpeg2video
Audio Cocec ac3
Pixel width 528
Pixel height 480
Sponsor Internet Archive
Audio/Visual sound, color

disc Borrow a DVD of this show
info Stream Only
Uploaded by
TV Archive
on 1/25/2013